My most recent books are the Leader's Guide to Radical Management (2010), The Leader's Guide to Storytelling (2nd ed, 2011) and The Secret Language of Leadership (2007). I consult with organizations around the world on leadership, innovation, management and business narrative. At the World Bank, I held many management positions, including director of knowledge management (1996-2000). I am currently a director of the Scrum Alliance, an Amazon Affiliate and a fellow of the Lean Software Society. You can follow me on Twitter at @stevedenning. My website is at www.stevedenning.com.

NBCUniversal: Comcast Leaps In Where GE Hesitates To Tread

When GE [GE] acquired NBC in 1986, it was the top-rated television network.

By 2004, NBC was struggling, but GE still saw prospects in television and entertainment, with a major acquisition of 80 percent of Universal (movies, TV shows, theme parks) from Vivendi for $5.9 billion, combining it with GE’s NBC.

Yet by 2011, GE reversed course, deciding that this once-hot sector of entertainment and television was not for GE. It ceded 51 percent control of NBCUniversal to Comcast [CMCSA] in January 2011. At the time, NBC had sunk to become the fourth-ranked network.

Yesterday, Comcast announced that it was buying the remaining 49 percent of NBCUniversal, several years ahead of the three-and-a-half to seven-year time-frame completing the deal. The price is a hefty $16.7 billion. Comcast is moving now because it is worried that the price would even be higher later, as it is investing heavily in NBCUniversal.

Where GE sees risks, Comcast sees only opportunity.

There were also culture clashes with GE. Bloomberg reports: “Comcast, with a conservative, low-profile culture, had clashed with the G.E. approach, according to employees and executives in television. Comcast moved NBCUniversal’s executive offices from the 52nd floor to the 51st floor — less opulent space that features smaller executive offices and a cozy communal coffee room instead of General Electric’s lavish executive dining room… In part because of the clash in corporate cultures, television executives said, both sides were eager to accelerate the sale.”

Comcast prospers where GE struggled

Several years ago, aaalysts had questioned whether a cable company like Comcast could really make a go of managing entertainment and television content, particularly after GE had struggled to make NBCUnversal work. But Comcast’s management is already seeing positive signs, with revenue and cash flow both improving.

The Wall Street Journal reports that even NBC itself is picking up: “NBC’s prime-time schedule, at least, has shown signs of a turnaround, after being mired in last place among the four major broadcast outlets for several years. For the first few months of the current season, which started in September, NBC was in first place among 18- to 49-year-olds, the demographic segment of most interest to advertisers…”

What will GE do with the money?

What will GE do with $16..7 billion? “GE has some things it would like to do with the money,” a GE manager is quoted in the Wall Street journal. However with the $77 billion that GE already had in the bank at the end of December, GE hardly needs another $16.7 billion.

So what will GE do with money? Mr. Immelt said in a statement: “By adding significant new capital to our balanced capital allocation plan, we can accelerate our share buyback plans while investing in growth in our core businesses.”

Translation? GE doesn’t know what to do with the money and is giving it back to shareholders. Like many large US companies, GE is sitting on a large amount of cash, and is unable to identify major opportunities to use it profitably. Although GE’s slogan is “imagination at work”, when it comes to investment in the future, imagination at GE is still in short supply.

The opportunities Comcast sees that GE couldn’t

By contrast, Comcast’s CEO, Brian Roberts, sees only opportunities. This morning on CNBC he said: “If actions speak louder than words, we’re bullish on the businesses we’re buying. We know these businesses. It’s three years since we signed a deal, and two years since we closed it and we have seen some early signs of turnaround and payoff for investments we’re making whether theme parks or cable networks or broadcast business or film business. We know a lot more today than we did two years ago.”

Where is Comcast investing? Roberts said: “With the theme park business being something we discovered with a whole new life, its growth in cash flow, in a number of visitors, the spend per visitor. We opened the Transformer’s ride in California. We’re bringing that very very successful ride to Orlando in 2013. We have said we will make major investments with the Harry Potter franchise so successful in Orlando, elsewhere in the Universal theme park. That’s capital for growth opportunities.

“At cable, same story. The maintenance capital, the cost of boxes continue to decline. As we want to increase the speeds of broadband and distance ourselves from our competitors, we continue to think that’s a great investment. We’ve also found new businesses such as the home security business. Business services was up 32% for the year in revenues. We decided to try to accelerate the investments in fiber to small and medium sized businesses.”

Comcast focus on employees and customers

Although Comcast has sometimes fared poorly in some cable customer satisfaction surveys, Roberts sees a commitment to employees and customers as the key to the future. “It’s content one way or the other that people really want. Having more content for our company that’s the best and most original and a place where artists want to come and work and they know we will distribute it in creative ways, that’s job one.

“But at the same time, if broadband continues to grow as it is and people want to consume it differently and they want to use wireless devices, as we clearly all do. We’re now the fastest in-home wifi, goals and claims and want to improve our broadband speeds. If there are other ways to acquire that content or other things you want to do, you come to Comcast. If you want the best experience on a television, come to Comcast. The strategy is to make sure we have the best products, the best network and the best content and if all that content isn’t ours and sometimes you aren’t consuming it through our bundles, that’s okay because we have more content.”

Efficiency versus innovation

Time will tell whether Comcast’s commitment to in delivering top quality to customers fully materializes. In the short run, Comcast is investing heavily in the future and putting its money where its mouth is. With a mindset focused on efficiency and rates of returns on investment, this would be difficult to do in the uncertain world of media. But where GE saw mainly risk, Comcast sees only opportunity.

Happily for Comcast, the stock market responds positively to boldness. While GE’s stock price has remained flat over the last ten years, Comcast has seen a 180 percent increase.

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Mr. Denning, your article selectively quotes Jeff Immelt to make assertions that not supported by the facts. With the first pay-down of NBCU, GE made strategic acquisitions in its energy and oil and gas businesses. Those acquisitions are performing ahead of expectations. We said yesterday that we would do the same with some of these latest NBCU proceeds. We are also investing in organic growth, spending $6 billion annually on research and development, which has allowed GE to introduce more products than ever, and growing our orders backlog to record levels. And as our investors know, we’ve been very clear on our capital allocation plans, which have not changed because of this transaction. We’re returning cash to shareholders through dividends and buybacks, investing in our core industrial businesses, and focusing our industrial M&A on bolt-on acquisitions. Translation: we know what to do with our cash and our investors like our strategy. And finally, it’s not accurate to say GE “struggled” to make NBCU work: the business generated an average return of 14% over more than two decades, and it was GE’s stewardship that turned NBC into a diversified global media leader with cable properties, theme parks and movies.

Thanks for your comments which add further valuable information to the discussion. I agree that there are mahy good things going on in GE, as I have written about on a number of occasions. I am not sure that in the overall scheme of things, NBCUniversal can be seen as a triumph when, for instance, NBC went from being the first ranked network to the fourth. It may have made a good financial return, but not in a sustainable way.

It just takes the proper person and/or people at the helm. Recently, I have seen so many articles about how you have to fail to succeed – my opinion is that you have to “succeed to succeed” and the principals of Agile, Continuous Improvement – Kaisen, Skunkworks, and ….. are all tools that can be used to achieve success.

And, as you preach “delight the customer.” I interviewed with a Hospital chain the other week and I was told (for hours) that in purchasing medical equipment my role (if hired) would be to persuade the physicians to cave to uniformity and lowest cost in tools (implying and often not implying the physicians were the weakest link in the supply chain). The problem here is that the hospital is a leading facility via their physician base and as such their physicians should not be moved off tools that they deem a key to their success. And, all that ran through my mind is that a higher road was well within grasps in negotiating (and the Vendor/Suppliers are very well use to negotiating) – a worthy challenge that should be freely accepted – they just needed someone that understood negotiation and was not afraid of walking into the fire pit.

The header for the last paragraph being “Efficiency versus innovation” does leave me with concern, as the two more often go hand in hand – most great things in the World have evolved through innovation.

I agree that “innovation vs efficiency” is not really what this is about. This is about achieving both. My sense is that GE, like so many big firms, has gotten focused on efficiency, which in turn kills innovation.

On Comcast: the jury is still out. They are talking a good game at present. But will they implement it?

Gary Sheffer from GE. Mr. Denning selectively focuses on NBC’s broadcast network, which, as I recall from a few years ago, is about 10 percent of NBCU’s revenues. He fails to mention other areas such as news, theme parks and cable, all of which were consistently #1 in their categories or grew significantly during GE’s ownership of NBCU.